Opinion
No. 38123.
December 3, 1951.
1. A loan company engaged in making loans at its office in this state had arranged with a nonresident corporation, by a written agreement or authorization, that the business would be handled in the following manner:
A borrower after having been approved for a loan by the local company, not by the nonresident, would sign a note payable to the nonresident and at the same time would draw a draft on the nonresident payable to himself, the draft and note being each in the actual amount he was to receive, plus interest and brokerage fees, so-called, and upon his endorsement of the draft the local company at its local office would immediately pay the amount thereof to the customer less the said interest and brokerage fees (these two items being greatly in excess of 15% of the amount received by the borrower) and at the close of the day's business the notes taken during that day and the interest collected thereon would be mailed to the nonresident and all the day's drafts would be enclosed in an envelope draft drawn by the local company on the nonresident for the total amount of all the drafts in the envelope, and the envelope draft would be cleared by the local company through regular local banking channels with the result that the borrower would receive his money from the local lender and the latter would have that money restored to it by local banking credit two or three days before the nonresident would know of the particular transactions, and later the customer's notes, payment of which was unconditionally guaranteed by the local company, would be paid at the local office: Held that the local company was engaged in making loans in this State at a greater rate of interest than 15% of the principal and was liable for the privilege taxes on such a business and for the damages for delinquency.
Headnote as approved by Lee, J.
APPEAL from the circuit court of Hinds County; HOMER CURRIE, Judge by interchange.
Lyell Lyell, for appellant.
I. The judgments of the lower court are contrary to the law and to the evidence and are wholly unsupported by any evidence or reasonable influence to be drawn from the evidence. Secs. 9696-115, 9696-134, 9696-135 Code 1942; Tower Underwriters, Inc. v. Lott, 50 So.2d 704; Allen v. Grenada Bank, et al., 133 So. 648; New England Mortgage Security Co. v. Townes, 1 So. 242; Pass v. New England Mortgage Security Co., 6 So. 239; Dodds v. Pyramid Securities Co., Inc., 165 Miss. 269, 147 So. 328; Greenlee v. Hardin, 157 Miss. 229, 127 So. 777; Castleman, et al. v. Canal Bank Trust Co., 156 So. 648; Chakales v. Dlivanides, 170 S.E. 862; 2 Am. Jur. 363, et seq.; Sec. 5212 Code 1942; 31 C.J.S. 745, et seq.; Darden v. American Bank Trust Co., 158 Miss. 742, 130 So. 507; 32 C.J.S. pp. 1044, 1050; Chap. 138 Laws 1944; Truckers Exchange Bank v. Conroy, 190 Miss. 242, 199 So. 301.
II. The note executed by the borrower and the draft drawn by the borrower were negotiable instruments and their meaning and import were controlled by the terms of the Negotiable Instruments Act of the State of Mississippi. Secs. 42, 99 Code 1942; Heaverin v. Darnell, 7 S. M., (15 Miss.) 244; Taylor v. C.I.T. Corp., 187 Miss. 581, 191 So. 60; Secs. 71, 93 Code 1942; New England Mortgage Security Co. v. Townes, 1 So. 242; Pass v. New England Mortgage Security Co., 6 So. 239.
III. The judgments constitute and are the deprivation of the property of the appellant without due process of law and in violation of the Fourteenth Amendment to the Federal Constitution and Section 14 of the Mississippi Constitution of 1890. Metropolitan Life Ins. Co. v. Hall, 152 Miss. 413, 118 So. 862; Carter v. Eastman-Gardner, 48 So. 615; Martin v. Gill, 182 Miss. 810, 181 So. 849.
John G. Burkett, for appellee.
The State Tax Collector, acting for the use and benefit of the City of Jackson, filed suit to recover from Dixie Brokerage Guaranty Company unpaid privilege taxes and damages, alleged to be due, on account of its business of lending money at a greater rate of interest than 15% per annum. The cause was tried before the circuit judge, without the intervention of a jury, upon an agreed statement of facts and documentary proof. From a judgment for the plaintiff, the defendant appeals.
The appellant had an office in the City of Jackson. It began business there in April 1949. On April 15, 1949, Southern Discount Corporation of Baton Rouge, Louisiana, in writing, authorized appellant and its customers to draw drafts on the corporation's account in Fidelity National Bank of Baton Rouge, Louisiana.
The circumstances attendant upon the procurement of a loan were as follows: The customer signed a borrower's statement, which gave information about him as a credit risk. The posted schedule of charges and the nature of the services were explained. If the customer desired to proceed, he signed (1) the brokerage contract; (2) a note payable to Southern Discount Corporation, which was the sum total of the amount he was to receive, plus interest at 6% per annum, and plus the brokerage charges; and (3) a draft, payable to himself, and drawn on Southern Discount Corporation of Baton Rouge, Louisiana, for the amount of the note. As a general rule, appellant cashed the draft, after its endorsement by the customer, and from the proceeds, it received the interest and its charges. Appellant unconditionally guaranteed the payment of the note. At the close of business, the notes of that day's business and the interest collected thereon were sent by appellant to the corporation by mail, and were delivered about two days later. The appellant placed the drafts which it had cashed for the day in an envelope draft, which it drew on the corporation for the total of the drafts in the envelope, and cleared the same through regular banking channels. The notes ran from thirty to ninety days, were payable weekly, semi-monthly or monthly, and were actually paid at the office of the appellant, who, in turn, remitted to the corporation. If a customer failed to pay a note, appellant was required to pay the same by the end of the second month after maturity. Applications averaged about 300 a month, and about 40% were rejected. The interest and the so-called brokerage charges were greatly in excess of 15% of the principal.
Obviously, by reason of the written authorization, the appellant secured credit at the local banks for the amount of the drafts without waiting for their collection. The borrower had nothing to do with the collection of the draft. The appellant cashed the draft, signed by the customer. How could it have otherwise collected its charges? Whether or not a loan would be made was determined in Jackson, not in Baton Rouge. The money was counted out to the borrower in the office of appellant in Jackson. The borrower had obtained his money two or three days before Southern Discount Corporation even heard of him. The loan had already been completed and consummated before the supposed lender in Baton Rouge even knew about it. It was not until after the loan was fully consummated in Jackson that the appellant drew its draft on Southern Discount Corporation, and enclosed the drafts which it had cashed. The corporation therefore was required to pay the envelope draft before it could even see the draft which had been drawn by the customer.
The principles governing this litigation are set out in the recent case of Alt v. Bailey, Miss., 52 So.2d 283, and the authorities there cited. We are unable to see any distinction between that case and the one now before us.
Affirmed.